If you encounter a Error 500 with the Flash uploader for NextGEN Gallery, it could be caused by the Mod_security addon for the Apache server. Thanks to the great response in the wordpress.org forums , there exists an easy work around for it. Add to your .htaccess file the follow exclude option :
<IfModule mod_security.c>
<Files upload.php>
SecFilterEngine Off
SecFilterScanPOST Off
</Files>
</IfModule>
Thanks to John Blackbourn for the hat tip !